Aviation analysts react to Boeing 737 Max fraud penalty
Boeing is being hit with a $2.5 billion penalty from the U.S. Department of Justice for deceiving the FAA about an automated flight system in the 737 Max.
That automated system ultimately led to two fatal crashes in Ethiopia and Indonesia, in which nearly 350 people died.
“The MCAS [Maneuvering Characteristics Augmentation System] was so strong that a pilot could not overcome it — it triggered multiple times, every five seconds, so there wasn’t time for the pilot to really recover from it,” explained local aviation consultant Scott Hamilton. “And the real problem was, the pilots did not even know it existed, because it had been removed from the flight manual.”
Being open about the new system, said Hamilton, would have required additional training for pilots using it — a massive expense for Boeing. He noted that Southwest Airlines wanted $1 million per airplane to cover training costs. Lion Air — one of the two airlines that suffered deadly Max crashes — even asked Boeing for training.
Instead, Boeing attempted to cover up its existence … which had deadly results.
“They definitely engaged in deception, and what you saw [last week] was the end result of it,” said Charles Herrmann of Seattle’s Herrmann Law Group, which is representing 51 of the crash victims’ families in litigation against Boeing.
Herrmann, who himself once worked for Boeing, said that the aerospace giant had always been a beloved Pacific Northwest staple, known for quality and safety above all — but he observed that something changed right around the time that headquarters moved to Chicago in 2001.
“The culture at Boeing changed when they moved the management from Seattle, right here on top of where the planes were being manufactured, to Chicago,” Herrmann said. “It shifted from quality to more oriented toward profit.”
He believes that change helped lead to the series of events that triggered the 737 Max crashes.
“The real answer to this case is all about profit,” he said. “They were getting beat by Airbus, and they tried to catch up. In doing so, they made mistakes that they covered up, and they just kept digging a bigger hole for themselves.”
The punishment fitting the crime?
Hamilton called the $2.5 billion penalty a “slap on the wrist,” noting that only a portion of that will actually go to the families and to the government as a fine.
“A lot of that was already committed by Boeing to the airlines as compensation for the MAX grounding,” he explained.
Airbus, he noted, paid a much higher price for a crime that did not have fatal results.
“In 2020, Airbus reached a deferred prosecution agreement with Britain, France, Germany, and the U.S. for a bribery scheme, and they paid $4.2 billion and nobody died,” Hamilton said.
Herrmann disagrees that it’s too light a punishment.
“I’d say it’s more than a slap on the wrist — it’s more like a punch in the gut,” he said.
He observed that Boeing has suffered already in sales and stocks.
“I don’t want to see Boeing financially punished beyond what they are — there’s no point in bankrupting them or astronomically trying to destroy,” he said. “There’s one thing to punish, okay, but not destroy.”
It will be tough to see exactly how exactly this affects passengers, as commercial flights are down so much from the pandemic, said Hamilton. Ultimately, though, he thinks that the main impact will be contained to Wall Street — regular people will continue to fly Boeing and continue to board a 737 Max.
How Boeing can regain its reputation
Hamilton applauds Boeing for trying to make up for its mistakes, but he said he won’t fully trust the company until it drastically changes its leadership.
“It’s got a lot of work to do to restore its credibility,” he said, adding, “Until Boeing does a drastic makeover of the Board of Directors, I think they’re going to continue being part of the good ol’ boys club.”
Herrmann said the change in leadership, culture, and thinking — a shift from profit back to safety — is needed not just at the top, but trickling all the way down to the factory floor.
“It’s got to begin with management, and not just the CEO and the few people around him, but the managers at the plant level and managers on shifts, and foremen and down significantly lower,” he said. “You’ve got to breathe that throughout all management.”
“It’s in the hole, and it’s going to take them some time to climb out of it,” he added. “But at the same time, I think they can do it, and I think they can put themselves back in the position of being the preeminent commercial aircraft manufacturer in the world.”